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January 3, 2017

Secondhand Smartphone Sales Rising on the Wings of iPhone and Samsung Phone Releases

The iPhone 7 and Samsung Galaxy S7 both came out this year. They’re two of the most popular cellphones in the world, and sales were through the roof for these devices. Some people were so excited for these phone releases that they waited in line for hours just to get one. They don’t care that the price of a brand new phone is upward of $700; they’re just excited to be among the elite who could get their hands on it first.

On the other hand, some people don’t want to pay a lot for a device they’ll only keep for a couple of years. They’re excited about phone releases for a different reason: They wait for this time to purchase their Smartphones used at a reduced price, and now that it’s legal to unlock cellphones for different carriers, it’s easier than ever for people to get their hands on a decent Smartphone.

As a result, secondhand smartphone sales have made a considerable jump, and they’re projected to continue rising, according to research from the International Data Corporation (IDC).  In fact, the used and refurbished Smartphone market is expected to rise to an unprecedented $30 billion in 2020 with the average price of a used phone being $136. That’s a compound annual growth rate of 22.3 percent.

Supply for Used Smartphones Can’t Handle Demand

Findings from the IDC also showed that major retailers in the United States and online have begun a system of accepting trade-ins for phones in order to sell them again. For example, on Black Friday, Verizon offered select customers a $300 discount on the new iPhone 7 Plus if they traded in their old iPhone 6.

This is one of many examples in which major retailers dip into great discounts to collect used phones. One reason for this trade in is to encourage people to purchase new phones when they may not have wanted to spend so much. If they can get a brand new phone for the price of a used one, they’re more likely to make the sale.

Phone carriers also do trade-ins because they know they can resell the phones at a higher margin in order to meet the demand. People prefer to purchase a refurbished phone from a reputable organization rather than purchasing it “as is” from a person on Craigslist.

“Mobile operators are the most constrained given the need for replacement devices for customers who have purchased device insurance plans,” says Anthony Scarsella, a program research manager for IDC. “In addition, used handsets provide an additional option for customers with subprime credit making them ineligible for equipment installment plans.”

We’ll See an Increase in Used Software and Computers

Smartphones aren’t the only gadgets seeing an increase in used sales. The demand for used Smartphones is also affecting the computer and software market.  There will be a higher demand for OEMs, mobile operators, and component suppliers. This will lead to an increase in revenue for the entire hardware and software market, according to IDC.

“Although there is a potential downside to mobile ecosystem suppliers, IDC believes that the used smartphone market also presents new opportunities to grow revenue and increase market share,” researchers reported.

New Smartphone Sales Diminishing

A direct consequence of this rapidly growing market is that new Smartphone sales are falling. At one point, new Smartphones were booming and one of the largest markets in the tech industry. People weren’t concerned about throwing down $600 for a Smartphone because they wanted the best tech possible.

However, research in June from Gartner showed that Smartphones sales are slowing drastically. The report indicated that it would be growing at less than half the capacity it had been before (7 percent in 2016 vs. 14.4 percent in 2015.)

“The Smartphone market will no longer grow at the levels it has reached over the last seven years,” said Roberta Cozza, research director at Gartner. “Smartphone sales recorded their highest growth in 2010, reaching 73 percent.”

People are simply keeping their phones for longer. Rather than replacing them once a year, they’re extending the life to a minimum of two-and-a-half years or longer. That will have a serious impact on the number of people who choose to replace their smartphones. This is one of the most important factors that goes into the rise of used Smartphone sales.


Larry Alton is an independent business consultant specializing in social media trends, business, and entrepreneurship. Follow him on Twitter and LinkedIn.